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The Cost of Safety: Understanding Value and the Big Picture

Part of an occupational health and safety (OHS) expert’s job is to report on budgets: the cost of PPE, the cost of training... in other words, the cost of safety. In a sense, it’s easy to calculate the cost of safety, because it’s really a total of:

While it’s relatively easy to add these figures, no full analysis of the cost of safety is complete without looking at the other side of the coin: the cost of accidents at work. This calculation is more complex (because it includes unknowns) but understanding the cost of an accident in the workplace is crucial to properly understand the value of safety initiatives.

How Do You Determine the Cost of an Accident in the Workplace?

Injury-related costs are a mix of obvious and hard-to-measure costs. One barrier to coming up with accurate figures is that every workplace accident is different. It’s very difficult to predict which injury will occur, and to whom, and how that will affect morale, wages, and retraining. But there are some costs you can quantify, and the OSHA injury calculator removes a lot of the guess work.

This online tool, part of the Safety Pays program, allows you to get a better idea of how specific types of injuries are likely to affect your company. Using OSHA statistics, the results give you an estimate of the direct costs and indirect costs of an injury, as well as how much sales revenue will be required to cover those losses. The results are sobering. And keep in mind that the calculator looks at work injury compensation and profit margins, but can’t account for: lowered morale, the cost of training a replacement employee, or lost production time.

OSHA’s tool is primarily a way to raise awareness rather than account for every factor involved, but regardless of the specifics, it’s clear that workplace injury costs vastly outweigh Safety costs.

The Cost of Safety Is an Investment in Productivity: Here’s the Proof

In 1987, aluminum giant Alcoa had a new CEO with a kooky idea. The then-failing company would immediately start putting workplace safety above all other considerations. Workers who didn’t report accidents were fired. Managers who didn’t escalate every incident report and provide a prevention suggestion within 24 hours met the same fate. When Paul O’Neill initially proposed these changes, the board thought he was crazy. As it turned out, the changes resulted in an injury rate that was one twentieth the American average at the time. Even more remarkably, Alcoa’s net income grew by a factor of five. Read more about this extraordinary story in our blog to understand the relationship between workplace safety culture and profitability.

American Jetways made a similar turnaround after a laceration injury in early 2015 cost them over $30 000. Shortly after the accident, the company ordered a host of different safety knives to trial and evaluate, eventually settling on Slice pen cutters. When we interviewed safety coordinator Robert Litner, American Jetways had gone 22 months without a single laceration injury since switching to ceramic safety blades. Beyond the human factor of doing the right thing and protecting their workers, the company’s new focus on safety cost substantially less than a single injury.

Workplace Safety Tips With Real ROI

Even if you’re convinced that safety costs are much lower than injury costs, this is the real world and you still need to work within a limited budget. Which safety and health topics should you highlight in your initiatives in order to get the biggest bang for your buck? The answer will depend on your particular business. For example, if there are no hazardous chemicals in your workplace, it doesn’t make sense to invest in hazmat handling training.

First, you’ll need to do a bit of research into the most common workplace injuries, and look at risks that disproportionately affect your business. A good way to start is to observe risks while people work, which is the initial stage of creating a workplace safety checklist. Once you know what risks you need to mitigate, use tools like past incident reports to get a sense of how frequently these accidents are happening, and the OSHA Safety Pays estimator to give you an idea of how expensive those kinds of injuries can be. This will clarify where your company is struggling and help you make a strategic plan for greater impact.

The Smart Money Is on Safety

Whether your research leads you change your training focus, or to invest in safer tools like finger-friendly® utility knives, box cutters, or precision knives, neither you nor your company will regret preventing accidents at work. In the end, the cost of accidents is always higher than the cost of safety.